El Paso Pipeline Partners LP (EPP) on Thursday said it would pay $394 million to acquire another 16% interest in Southern Natural Gas Co. (SNG) from El Paso Corp., which would give it a 41% stake in the pipeline.

El Paso Corp. also granted EPP a 90-day option to purchase up to an additional 4% interest in SNG at a price of around $25 million/percent interest purchased.

EPP CEO Jim Yardley said the partnership’s fourth acquisition from the parent company “consolidates our growing asset base. The acquisition, which is immediately accretive to distributable cash flow, increases our interest in the Southeast’s premier natural gas transmission franchise. SNG’s strategically located assets are supported by consistent, strong cash flows and continued organic growth opportunities.”

In March EPP agreed to acquire a majority stake in both Southern LNG Co. LLC and El Paso Elba Express Co. LLC from the corporation for $810 million (see Daily GPI, March 26). El Paso Corp., which owns 60% of the limited partnership and 2% of the general partner interest, launched the pipeline unit almost three years ago (see Daily GPI, Nov. 12, 2007). The partnership also owns Wyoming Interstate Co. and a 58% interest in Colorado Interstate Gas Co.

The SNG transaction, which is expected to close by the end of the month, is to be funded either with debt incurred under the partnership’s revolving credit facility, by issuing public securities or through a promissory note to the corporation.

Management has recommended an increase in the quarterly cash distribution to 40 cents/unit, or $1.60/unit annually, beginning with the 2Q2010 distribution, which would be declared and paid in 3Q2010. If approved by the board, it would represent a 5% increase from 1Q2010’s distribution of 38 cents/unit, and would be 21% higher than the partnership’s distribution in 2Q2009 (33 cents/unit).

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